Citi's Mexican unit expects interest rate cut in September

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FILE PHOTO: The logo of Mexico's Central Bank (Banco de Mexico) is seen at its building in downtown Mexico City, Mexico February 28, 2019. REUTERS/Daniel Becerril/File Photo

MEXICO CITY (Reuters) - Citibanamex, the Mexican unit of Citigroup Inc (C.N), said on Thursday that its latest poll of analysts forecast that Mexico’s central bank will cut its benchmark overnight lending rate by 25 basis points to 7.75% at its Sept. 26 meeting.

In a majority decision, the Bank of Mexico’s five-member board voted at its Aug. 15 meeting to lower the overnight interbank rate by 25 basis points to 8.00%, the first cut since June 2014, citing slowing inflation and increasing slack in the economy.

All but two of the 24 analysts polled by Citibanamex said they expect the central bank to cut the rate by a quarter of a percentage point at the September meeting.

Citibanamex said the median response of its poll saw the key rate being cut 50 basis points from its current level to 7.50% by the end of the year, from a prior forecast of 7.75%.

It also lowered its view for Mexican economic growth in 2019 to 0.5%, from 0.6% previously. Citibanamex reduced its forecast for gross domestic product growth in 2020 to 1.3%, from 1.4%.

Late last month, the Bank of Mexico said slack economic conditions will persist for longer than expected, slashing its economic outlook for this year to forecast virtually no growth.

It now forecasts growth will range between 0.2% and 0.7% in 2019, down from an earlier prediction of between 0.8% and 1.8%.